AP NewsBreak: Yankees hit with $26 million luxury tax, raising total to nearly $98 million
By RONALD BLUM, AP Baseball Writer
December 22, 2006
NEW YORK (AP) -- The Yankees got the bill Friday for their sorry season.
The Yankees were slapped with a $26 million luxury tax by the commissioner's office, raising New York's total to $97.75 million over the last four years.
Boston, which missed the playoffs, was the only other team over the tax threshold and will pay $497,549.
New York hasn't won the World Series since 2000, and was knocked out in the first round of the playoffs for the second straight year. The Yankees paid tax in all four seasons of the just-expired collective-bargaining agreement: $11.8 million in 2003, $26 million in 2004 and $34 million for last year.
While the Yankees' spending on players may have decreased because of the tax, the team says any dip was slight.
"I would say it has an effect," Yankees president Randy Levine said. "But at the end of the day, it's always been George Steinbrenner's philosophy to win. If a difference-maker is attainable, the Boss goes and gets him."
At the center of labor negotiations in 2002, the luxury tax was paid by only three teams over the four seasons, with the Red Sox owing $7.8 million and the Anaheim/Los Angeles Angels $927,057.
Payments are due at the commissioner's office by Jan. 31. Commissioner Bud Selig concluded the tax achieved the result management wanted.
"I think it did. I really think, frankly, everything that we did pretty well came out to its projection," he said.
New York's bill decreased this year because its payroll, as calculated for the tax, declined from $212.9 million to $201.5 million and the threshold for where the tax began increased from $128 million to $136.5 million. Under the new labor contract, the threshold for the tax rises to $148 million next year.
For luxury tax purposes, the average annual values of contracts are used and benefits are included.
"The luxury tax is not the something the players are in love with because its purpose is to cause people to have an extra cost when they sign a player," union head Donald Fehr said. "Obviously we were prepared to live with it during the term of the last agreement and we got what we expect will be appropriate modifications this time.
"We didn't really envision specific numbers. What we were hoping was that we would see a circumstance in which it did not have a meaningful adverse effect on the player market, and obviously you have to judge that year by year."
Using the regular method of accounting, the Yankees finished with a $207.5 million payroll for their 40-man roster, according to final figures released Friday by the commissioner's office, up from $206.6 million in 2005.
Boston was a distant second this year at $137.5 million, followed by the New York Mets ($116.6 million), Houston ($107.7 million), the Los Angeles Dodgers ($107.2 million) and the Los Angeles Angels ($104 million).
The World Series champion St. Louis Cardinals were 10th at $96.1 million, and the AL champion Detroit Tigers were 14th at $89.8 million.
Florida, last at $21.1 million, had less than half the payroll of Pittsburgh, 28th at $43.4 million. Tampa Bay was in between them at $36.4 million.
Management calculated the average salary at $2,642,915. The players' association, whose calculation method differs slightly, had the average at $2,699,292 in its annual report this week.